NEW YORK (TheStreet) -- Wall Street traders were 'welcomed' back from the long Memorial Day weekend with a stock slump on Tuesday as Federal Reserve fears got the better of even the most optimistic.
Signs of economic recovery from the housing sector and durable goods numbers exacerbated fears the Fed would hike rates sooner than expected. Click here for more.
The S&P 500 was down 1%, the Dow Jones Industrial Average fell 186 points or 1%, and the Nasdaq dropped 1.1%. The Volatility Index (VIX.X), or 'fear' index, jumped 17.2% to 14.21.
"When you take a look at the data, it was supportive of [Fed Chair Janet] Yellen's comments Friday -- certainly more supportive of raising rates than not," Paul Nolte, portfolio manager at Kingsview Asset Management, told CNBC.
A stronger U.S. dollar hit commodities which were viewed as more expensive to international markets. West Texas Intermediate crude closed 2.8% lower to $58.03 a barrel. Shares of Exxon Mobil (XOM), BP (BP), Royal Dutch Shell (RDS.A) and Chevron (CVX) all were lower.
The U.S. dollar gained against a basket of international currencies on better-than-expected data on home prices and consumer confidence. The greenback has surged this year since it's viewed as a safe-haven asset as the Fed looks to tighten policy while the European Central Bank introduces stimulus.
New-home sales bounced back in April, climbing 6.8% to an annual rate of 517,000 after a poor performance in March due to winter weather. Economists had expected sales of 490,000.